The Structure of EU-CEE Intra-Industry Trade
This paper presents an analysis of the growth and structure of EU-CEE intra-industry trade since the latter commenced their economic transition in the late 1980's. Section 2 outlines the economic rationale for intra-industry trade and its classification into horizontal and vertical two-way trade. Section 3 discusses the empirical classification of trade flows. Rather than relying on the conventional Grubel-Lloyd index as an indicator of intra-industry trade the analysis uses a decomposition due to Fontagne and Freudenberg (1997a, 1997b) which provides consistency between theory and measurement. Section 4 uses this technique to decompose EU-CEE trade flows over 1990 to 1995. Dection 6 addresses the issue of adjustment costs by distinguishing between static and dynamic, or marginal, trade flows.
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